Gold surges after June CPI posts steepest drop since 2020

Gold rallied sharply on Tuesday after a cooler-than-expected U.S. inflation report weakened the dollar and revived hopes that the Federal Reserve could hold off on further rate hikes. Spot gold rose more than 1% to around $4,046 per ounce in afternoon trading, according to Reuters, after earlier touching its lowest level since July 1. The gains came as the U.S. Dollar Index fell roughly 0.3% on the session.tradingeconomics+2

The catalyst was the Bureau of Labor Statistics' Consumer Price Index report for June, released at 8:30 a.m. ET. Headline CPI fell 0.4% on the month — the steepest monthly decline since April 2020 — bringing the annual rate down to 3.5%, well below the 3.8% consensus forecast. Core CPI came in flat on a monthly basis, with the annual rate dropping to 2.6%. Collapsing gasoline prices, driven by a brief reopening of the Strait of Hormuz following an Iran ceasefire, accounted for much of the decline.investing+2

Fed at a Crossroads

The inflation miss injected fresh uncertainty into the Federal Reserve's rate path. Just a day earlier, Fed Governor Christopher Waller had warned that the central bank may need to raise interest rates "in the near term" if inflation data continued to run hot, calling monetary policy at a "crossroads". Waller specifically flagged Tuesday's CPI as a pivotal release, saying that "another hot reading on core inflation this week" would compel the Federal Open Market Committee to consider tightening. The soft print may now temper that urgency.wmbdradio

Markets had entered the week on edge. Gold had fallen for several consecutive sessions, briefly slipping below the key $4,000 level, as a stronger dollar and hawkish Fed expectations weighed on the metal. The CPI surprise reversed that momentum, with gold jumping as much as $90 within minutes of the release.instaforex+2

Central Bank Demand Provides a Floor

Beyond near-term macro data, structural demand continues to underpin gold prices. Central banks purchased an estimated 244 tonnes of gold in the first quarter of 2026, exceeding both the prior quarter and the five-year average, according to the World Gold Council. A record 45% of central banks surveyed plan to increase their gold holdings over the coming year, with institutions averaging roughly 1,000 tonnes in annual purchases for four consecutive years — double the pace of the preceding decade.advantagegold+1

Goldman Sachs ↗ 4.67% strategists have attributed the buying surge to diversification away from dollar-denominated reserves amid geopolitical uncertainty, estimating central banks will average around 60 tonnes per month through 2026. J.P. Morgan JPMorgan Chase & Co. ↗ 2.27% maintains a year-end gold forecast of $6,000 per ounce.kitco+1

With the dollar now facing headwinds from the inflation miss and traders reassessing the likelihood of a near-term rate hike, gold's ability to hold above $4,000 may hinge on whether upcoming data confirms the disinflationary trend — or whether Waller's warning proves prescient.